S T A T E O F N E W Y O R K
________________________________________________________________________
1387
2021-2022 Regular Sessions
I N S E N A T E
January 11, 2021
___________
Introduced by Sens. BROOKS, AKSHAR, GALLIVAN -- read twice and ordered
printed, and when printed to be committed to the Committee on Procure-
ment and Contracts
AN ACT to amend the state finance law and the general municipal law, in
relation to requiring full payment for delivered and accepted materi-
als pertaining to public work projects; and to amend the general busi-
ness law, in relation to prohibiting the retention of any payment due
and owing a material supplier for a construction project
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
Section 1. Subdivisions 1 and 2 of section 139-f of the state finance
law, subdivision 1 as added by chapter 769 of the laws of 1978 and
subdivision 2 as amended by section 16 of part MM of chapter 57 of the
laws of 2008, are amended to read as follows:
1. Payment by public owners to contractors. The contractor shall peri-
odically, in accordance with the terms of the contract, submit to the
public owner and/or [his] ITS agent a requisition for a progress payment
for the work performed and/or materials furnished to the date of the
requisition, less any amount previously paid to the contractor. The
public owner shall in accordance with the terms of the contract approve
and promptly pay the requisition for the progress payment less an amount
necessary to satisfy any claims, liens or judgments against the contrac-
tor which have not been suitably discharged and less any retained amount
as hereafter described. The public owner shall retain not more than five
per centum of each progress payment, NOT INCLUDING ANY PAYMENT FOR MATE-
RIALS PERTINENT TO THE PROJECT WHICH HAVE BEEN DELIVERED, ACCEPTED AND
ARE COVERED BY A MANUFACTURER'S WARRANTY, AND/OR ARE GRADED TO MEET
INDUSTRY STANDARDS, to the contractor except that the public owner may
retain in excess of five per centum but not more than ten per centum of
each progress payment, NOT INCLUDING ANY PAYMENT FOR MATERIALS PERTINENT
TO THE PROJECT WHICH HAVE BEEN DELIVERED, ACCEPTED AND ARE COVERED BY A
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD03376-01-1
S. 1387 2
MANUFACTURER'S WARRANTY, AND/OR ARE GRADED TO MEET INDUSTRY STANDARDS,
to the contractor provided that there are no requirements by the public
owner for the contractor to provide a performance bond and a labor and
material bond both in the full amount of the contract. The public owner
shall pay IN FULL, upon requisition from the contractor, for ALL materi-
als pertinent to the project which have been delivered to the site or
off-site by the contractor and/or subcontractor and suitably stored and
secured as required by the public owner and the contractor [provided,
the public owner may limit such payment to materials in short and/or
critical supply and materials specially fabricated for the project each
as defined in the contract]. When the work or major portions thereof as
contemplated by the terms of the contract are substantially completed,
the contractor shall submit to the public owner and/or [his] ITS agent a
requisition for payment of the remaining amount of the contract balance.
Upon receipt of such requisition the public owner shall approve and
promptly pay the remaining amount of the contract balance less two times
the value of any remaining items to be completed and an amount necessary
to satisfy any claims, liens or judgments against the contractor which
have not been suitably discharged. As the remaining items of work are
satisfactorily completed or corrected, the public owner shall promptly
pay, upon receipt of a requisition, for these remaining items less an
amount necessary to satisfy any claims, liens or judgments against the
contractor which have not been suitably discharged. Any claims, liens
and judgments referred to in this section shall pertain to the project
and shall be filed in accordance with the terms of the applicable
contract and/or applicable laws.
2. Payment by contractors to subcontractors. Within seven calendar
days of the receipt of any payment from the public owner, the contractor
shall pay each of [his] ITS subcontractors and materialmen the proceeds
from the payment representing the value of the work performed and/or
materials furnished by the subcontractor and/or materialman and reflect-
ing the percentage of the subcontractor's work completed or the
materialman's material supplied in the requisition approved by the owner
and based upon the actual value of the subcontract or purchase order
less an amount necessary to satisfy any claims, liens or judgments
against the subcontractor or materialman which have not been suitably
discharged and, WITH REGARD TO SUBCONTRACTORS, less any retained amount
as hereafter described. Failure by the contractor to pay any subcontrac-
tor or materialman within seven calendar days of the receipt of any
payment from the public owner shall result in the commencement and
accrual of interest on amounts due to such subcontractor or materialman
for the period beginning on the day immediately following the expiration
of such seven calendar day period and ending on the date on which
payment is made by the contractor to such subcontractor or materialman.
Such interest payment shall be the sole responsibility of the contrac-
tor, and shall be paid at the rate of interest in effect on the date
payment is made by the contractor. Notwithstanding any other provision
of law to the contrary, interest shall be computed at the rate estab-
lished in paragraph (b) of subdivision one of section seven hundred
fifty-six-b of the general business law. The contractor shall retain not
more than five per centum of each payment to the subcontractor [and/or
materialman] except that the contractor may retain in excess of five per
centum but not more than ten per centum of each payment to the subcon-
tractor provided that prior to entering into a subcontract with the
contractor, the subcontractor is unable or unwilling to provide a
performance bond and a labor and material bond, both in the full amount
S. 1387 3
of the subcontract, at the request of the contractor. THE CONTRACTOR
SHALL PAY IN FULL, UPON PAYMENT BY THE PUBLIC OWNER, FOR ALL MATERIALS
PERTINENT TO THE PROJECT WHICH HAVE BEEN DELIVERED TO AND ACCEPTED AT
THE SITE OR OFF-SITE BY A MATERIALMAN AND ARE COVERED BY A MANUFACTUR-
ER'S WARRANTY, AND/OR ARE GRADED TO MEET INDUSTRY STANDARDS. However,
EXCEPT IN THE CASE OF A MATERIALMAN WHO IS ALSO CONTRACTED TO INSTALL A
PRODUCT HE/SHE DELIVERED, the contractor shall retain nothing from those
payments representing proceeds owed the subcontractor and/or materialman
from the public owner's payments to the contractor for the remaining
amounts of the contract balance as provided in subdivision one of this
section. If the contractor has failed to submit a requisition for
payment of the remaining amounts of the contract balance within ninety
days of substantial completion as provided in subdivision one of this
section, then any clause in the subcontract between the contractor and
the subcontractor or materialman which states that payment by the
contractor to such subcontractor or materialman is contingent upon
payment by the owner to the contractor shall be deemed invalid. Within
seven calendar days of the receipt of payment from the contractor, the
subcontractor and/or materialman shall pay each of [his] ITS subcontrac-
tors and materialmen in the same manner as the contractor has paid the
subcontractor, including interest as herein provided above. Nothing
provided herein shall create any obligation on the part of the public
owner to pay or to see to the payment of any moneys to any subcontractor
or materialman from any contractor nor shall anything provided herein
serve to create any relationship in contract or otherwise, implied or
expressed, between the subcontractor or materialman and the public
owner.
§ 2. Paragraph (a) of subdivision 1 and subdivision 2 of section 106-b
of the general municipal law, paragraph (a) of subdivision 1 as amended
by chapter 98 of the laws of 1995 and subdivision 2 as amended by
section 15 of part MM of chapter 57 of the laws of 2008, are amended to
read as follows:
(a) The contractor shall periodically, in accordance with the terms of
the contract, submit to the public owner and/or [his] ITS agent a requi-
sition for a progress payment for the work performed and/or materials
furnished to the date of the requisition less any amount previously paid
to the contractor. The public owner shall in accordance with the terms
of the contract approve and promptly pay the requisition for the
progress payment less an amount necessary to satisfy any claims, liens
or judgments against the contractor which have not been suitably
discharged and less any retained amount as hereafter described. The
public owner shall retain not more than five per centum of each progress
payment, NOT INCLUDING ANY PAYMENT FOR MATERIALS PERTINENT TO THE
PROJECT WHICH HAVE BEEN DELIVERED, ACCEPTED AND ARE COVERED BY A
MANUFACTURER'S WARRANTY, AND/OR ARE GRADED TO MEET INDUSTRY STANDARDS,
to the contractor except that the public owner may retain in excess of
five per centum but not more than ten per centum of each progress
payment, NOT INCLUDING ANY PAYMENT FOR MATERIALS PERTINENT TO THE
PROJECT WHICH HAVE BEEN DELIVERED, ACCEPTED AND ARE COVERED BY A
MANUFACTURER'S WARRANTY, AND/OR ARE GRADED TO MEET INDUSTRY STANDARDS,
to the contractor provided that there are no requirements by the public
owner for the contractor to provide a performance bond and a labor and
material bond both in the full amount of the contract. The public owner
shall pay IN FULL, upon requisition from the contractor, for ALL materi-
als pertinent to the project which have been delivered to the site or
off-site by the contractor and/or subcontractor and suitably stored and
S. 1387 4
secured as required by the public owner and the contractor [provided,
the public owner may limit such payment to materials in short and/or
critical supply and materials specially fabricated for the project each
as defined in the contract]. When the work or major portions thereof as
contemplated by the terms of the contract are substantially completed,
the contractor shall submit to the public owner and/or [his] ITS agent a
requisition for payment of the remaining amount of the contract balance.
Upon receipt of such requisition the public owner shall approve and
promptly pay the remaining amount of the contract balance less two times
the value of any remaining items to be completed and an amount necessary
to satisfy any claims, liens or judgments against the contractor which
have not been suitably discharged. As the remaining items of work are
satisfactorily completed or corrected, the public owner shall promptly
pay, upon receipt of a requisition, for these items less an amount
necessary to satisfy any claims, liens or judgments against the contrac-
tor which have not been suitably discharged. Any claims, liens and judg-
ments referred to in this section shall pertain to the project and shall
be filed in accordance with the terms of the applicable contract and/or
applicable laws. Where the public owner is other than the city of New
York, the term "promptly pay" shall mean payment within thirty days,
excluding legal holidays, of receipt of the requisition unless such
requisition is not approvable in accordance with the terms of the
contract. Notwithstanding the foregoing, where the public owner is other
than the city of New York and is a municipal corporation which requires
an elected official to approve progress payments, "promptly pay" shall
mean payment within forty-five days, excluding legal holidays, of
receipt of the requisition unless such requisition is not approvable in
accordance with the terms of the contract.
2. Payment by contractors to subcontractors. Within seven calendar
days of the receipt of any payment from the public owner, the contractor
shall pay each of [his] ITS subcontractors and materialmen the proceeds
from the payment representing the value of the work performed and/or
materials furnished by the subcontractor and/or materialman and reflect-
ing the percentage of the subcontractor's work completed or the
materialman's material supplied in the requisition approved by the owner
and based upon the actual value of the subcontract or purchase order
less an amount necessary to satisfy any claims, liens or judgments
against the subcontractor or materialman which have not been suitably
discharged and, WITH REGARD TO SUBCONTRACTORS, less any retained amount
as hereafter described. Failure by the contractor to make any payment,
including any remaining amounts of the contract balance as hereinafter
described, to any subcontractor or materialman within seven calendar
days of the receipt of any payment from the public owner shall result in
the commencement and accrual of interest on amounts due to such subcon-
tractor or materialman for the period beginning on the day immediately
following the expiration of such seven calendar day period and ending on
the date on which payment is made by the contractor to such subcontrac-
tor or materialman. Such interest shall be the sole responsibility of
the contractor, and shall be paid at the rate of interest in effect on
the date payment is made by the contractor. Notwithstanding any other
provision of law to the contrary, interest shall be computed at the rate
established in paragraph (b) of subdivision one of section seven hundred
fifty-six-b of the general business law. The contractor shall retain not
more than five per centum of each payment to the subcontractor [and/or
materialman] except that the contractor may retain in excess of five per
centum but not more than ten per centum of each payment to the subcon-
S. 1387 5
tractor provided that prior to entering into a subcontract with the
contractor, the subcontractor is unable or unwilling to provide a
performance bond and a labor and material bond both in the full amount
of the subcontract at the request of the contractor. THE CONTRACTOR
SHALL PAY IN FULL, UPON PAYMENT BY THE PUBLIC OWNER, FOR ALL MATERIALS
PERTINENT TO THE PROJECT WHICH HAVE BEEN DELIVERED TO AND ACCEPTED AT
THE SITE OR OFF-SITE BY A MATERIALMAN AND ARE COVERED BY A MANUFACTUR-
ER'S WARRANTY, AND/OR ARE GRADED TO MEET INDUSTRY STANDARDS. However,
EXCEPT IN THE CASE OF A MATERIALMAN WHO IS ALSO CONTRACTED TO INSTALL A
PRODUCT HE/SHE DELIVERED, the contractor shall retain nothing from those
payments representing proceeds owed the subcontractor and/or materialman
from the public owner's payments to the contractor for the remaining
amounts of the contract balance as provided in subdivision one of this
section. If the contractor has failed to submit a requisition for
payment of the remaining amounts of the contract balance within ninety
days of substantial completion as provided in subdivision one of this
section, then any clause in the subcontract between the contractor and
the subcontractor or materialman which states that payment by the
contractor to such subcontractor or materialman is contingent upon
payment by the owner to the contractor shall be deemed invalid. Within
seven calendar days of the receipt of payment from the contractor, the
subcontractor and/or materialman shall pay each of [his] ITS subcontrac-
tors and materialmen in the same manner as the contractor has paid the
subcontractor, including interest as herein provided above. Nothing
provided herein shall create any obligation on the part of the public
owner to pay or to see to the payment of any moneys to any subcontractor
or materialman from any contractor nor shall anything provided herein
serve to create any relationship in contract or otherwise, implied or
expressed, between the subcontractor or materialman and the public
owner.
§ 3. Section 756-c of the general business law, as added by chapter
127 of the laws of 2002, is amended to read as follows:
§ 756-c. Retention. 1. By mutual agreement of the relevant parties an
owner may retain a reasonable amount of the contract sum as retainage. A
contractor or subcontractor may also retain a reasonable amount for
retainage so long as the amount does not exceed the actual percentage
retained by the owner. Retainage shall be released by the owner to the
contractor no later than thirty days after the final approval of the
work under a construction contract. In the event that an owner fails to
release retainage as required by this article, or the contractor or
subcontractor fails to release a proportionate amount of retainage to
the relevant parties after receipt of retainage from the owner, the
owner, contractor, or subcontractor, as the case may be, shall be
subject to the payment of interest at the rate of one percent per month
on the date retention was due and owing.
2. NOTWITHSTANDING THE PROVISIONS OF SUBDIVISION ONE OF THIS SECTION,
NO PORTION OF ANY PAYMENT DUE AND OWING TO A MATERIAL SUPPLIER FOR MATE-
RIALS WHICH HAVE BEEN DELIVERED, ACCEPTED AND ARE COVERED BY A MANUFAC-
TURER'S WARRANTY, AND/OR GRADED TO MEET INDUSTRY STANDARDS SHALL BE
RETAINED BY AN OWNER, CONTRACTOR OR SUBCONTRACTOR.
§ 4. This act shall take effect on the thirtieth day after it shall
have become a law and shall apply to materials delivered and accepted on
or after such effective date.
